Global growth concerns sent Japanese Yen at 1-month high…

Good Morning,

– Global growth concerns sent Japanese Yen at 1-month high vs dollar..

– Mario Draghi and Jens Weidmann are clashing anew over how much more stimulus the ailing euro-area economy needs from the European Central Bank. As Europe’s woes again proved the chief concern at weekend meetings of the International Monetary Fund in Washington, President Draghi repeated he’s ready to expand the ECB’s balance sheet by as much as 1 trillion euros ($1.3 trillion) to beat back the threat of deflation. Bundesbank head Weidmann responded by saying that a target value isn’t set in stone.

– The U.S. economy looks better able to withstand the hit from a stronger dollar and weaker global growth than the stock market did last week. Foreign sales last year accounted for 46.3 percent of revenues for companies in the Standard & Poor’s 500 Index in 2013, leaving them prone to a rising greenback and the recent slowdowns in Europe and Asia, according to S&P Dow Jones Indices in New York. By contrast, U.S. exports compose just 13.5 percent of the economy. “The U.S. economy is less open than the S&P revenue base,” said Jan Hatzius, chief economist at Goldman Sachs Group Inc. in New York.

– Goldman Sachs on EUR/USD: GS cuts its EUR/USD forecast and now expects the pair to trade at 1.23, 1.20 and 1.15, in 3, 6 and 12 months from 1.29, 1.25 and 1.20 previously. GS expects EUR/USD to fall to parity by the end of 2017. “Overall, we think current levels in EUR/$ do not yet reflect the kind of balance sheet expansion that ECB President Draghi has mentioned. As the market becomes more comfortable that the ECB will bring its balance sheet back to early-2012 levels, we think we will see more Euro weakness,” GS projects. “In addition, our European Economists see downside risks to the ECB’s inflation and growth forecasts, which points to the potential for more easing beyond the measures that have already been announced,” GS adds. “We think a large portion of foreign portfolio inflows into the Euro area since Mr. Draghi’s “whatever it takes” speech is likely to be unhedged. This means that the underlying long Euro position is likely to be sizeable, which is ignored by simple positioning metrics like the CFTC’s CoT report,” GS argues.

– IMF Warns Policymakers: The extended period of monetary accommodation and the accompanying search for yield are leading to credit mispricing and asset price pressures, increasing the chance that financial stability risks could derail the recovery. Concerns have shifted to the shadow banking system, especially the growing share of illiquid credit in mutual fund portfolios. Should asset markets come under stress, an adverse feedback loop between outflows and asset performance could develop, moving markets from a low- to a high-volatility state, with negative implications for emerging market economies.

– The dollar fell to a one-month low against the yen, as heightened worries about the global economy continued to shore up the safe-haven Japanese currency.

– In a sign of the jittery market mood, Wall Street’s fear gauge, the CBOE Volatility Index, touched a near two-year high of 22.06 on Friday.

– China’s exports rose more than estimated in September and imports rebounded as global demand helps underpin growth in the world’s second-largest economy. Exports increased 15.3 percent from a year earlier, the Beijing-based customs administration said today, compared with the 12 percent median estimate in a Bloomberg News survey of analysts. Imports rose 7 percent, against projections for a 2 percent decline, leaving a trade surplus of $31 billion.

– Russian central bank raises ruble corridor boundaries by 25 kopecks. Now 36.25-45.25 from 36-45 effective Oct 10; central bank says it sold USD 866m for Oct 10 settlement according to the bank’s website.